1 on 1: Ed Andrewes on advising Resorts Digital in New Jersey
1 on 1: Ed Andrewes on advising Resorts Digital in New Jersey
The latest figures from the Division of Gaming Enforcement in New Jersey (DGENJ) point to the continued flourishing of the online market in the Garden State with revenues for the market as a whole in July up 39% to $17.4m. Although market-leader Borgata’s revenues were relatively subdued (revenues up 3.7% to $3.97m), the rest of the competition surged.
The Golden Nugget and Caesars Interactive each enjoyed a good month, with revenues up 36% to $3.7m and 27% to $3.4m respectively, while the Tropicana more than wiped its face with an 18% rise to $3.4m. However, it was the Resorts Digital/PokerStars numbers that continue to catch the eye with revenues now standing at $3.05m for July as the operation continued to pick up momentum since the combined launch in March (Resorts was up-and-running before that).
Helping to run Resorts digital business in New Jersey is ex-Ladbrokes and 32Red executive Ed Andrewes, a man well-versed in the European online scene who transferred to the Garden State at the start of this year. Here TotallyGaming.com asks him about the progress being made in New Jersey and how he thinks the market will develop.
TotallyGaming: What were your first impressions of the New Jersey market when you first joined?
Ed Andrewes: When I first started working for Resorts, I was actually quite surprised how similar the European and New Jersey markets were both in terms of online casino product and business metrics. Most of the popular European slot content is now available. There is still a gap in the market for decent table games on mobile and this is definitely an opportunity for the content providers.
Similar to Europe, mobile has come to dominate with over 60% of gross gaming revenue coming from this channel and this is only set to increase. Cost per acquisition and yield are very similar to what I have seen in the European market. The real big difference in New Jersey is the retention rates which are considerably higher than Europe due to the limited number of licenses on offer.
TG: How is the Resorts/Stars product offering doing in the current market?
EA: We are pretty pleased with the Resorts performance so far and we now account for 18% of the total revenues from a standing start less than 18 months ago. I actually think New Jersey is one of those rare markets which demonstrates second-mover advantage. The initial market projections were wildly over-exaggerated and the potential size of the market never really justified them. Coupled with the fact that there were issues over geo-compliance and payments meant the early movers were inevitably disappointed with the performance from their substantial marketing spend.
At Resorts we have been able to learn from these experiences and tailor our budgets accordingly. That said, we are also very conscious that growing into the next 5% of the market is going to be a lot tougher than the first 18%. The key issue for poker in New Jersey is still liquidity and the proposed development to allow pooling with the UK is a major breakthrough and should lead to a period of sustained growth once it is introduced.
I have not been particularly surprised with the performance differential between casino and poker because the history of the industry tells us how important liquidity is to poker and the existing poker operators have not managed to generate critical mass.
TG: How do you see New Jersey developing?
EA: I think there is still substantial growth left in the New Jersey market. You need to remember that for years online gaming was painted as the dark beast of gambling and there is still a job to be done in changing this perception. It is amazing when you walk around the bricks-and-mortar casino to find out how many of the customers still think online gaming is illegal and there is still a way to go in educating these consumers. Furthermore, the technical issues surrounding payments and geo-compliance are improving the whole time which is making a big difference to the customer experience.
TG: As an observer, do you think having sports-betting legal in New Jersey will help with the online market?
EA: Without doubt the legalisation of sports betting in New Jersey (would) provide the largest uplift to the online market. To someone with a sportsbook background from the European market, the current federal law which makes sports-betting illegal under the Professional and Amateur Sports Protection Act (PASPA) makes absolutely no sense. The current political processes have gone against New Jersey to allow sports betting but I am confident that within the next five years the federal government will come to their senses and when this does happen, Resorts will be in a prime position to benefit.
TG: Is it difficult to separate your business from how Atlantic City is faring and the wider issues there?
EA: Atlantic City is reliant on revenues both from online and land-based casinos. Furthermore, the Resorts shareholders are fully committed to the city, so the business and Atlantic City’s welfare are totally integral. It is sad to see the position the city has got itself in to however, with the right management, I think it still has the potential to be the Vegas of the East coast in the long term. To me the current proposed legislation for two casinos in North Jersey is absolute madness.
Four Atlantic City casinos closed in 2014 due to competition from other states and, according to a recent study by Cory Morowitz, the two North Jersey Casinos would siphon up to $1.4 billion in gaming revenue from Atlantic City. This would result in a further three to five casinos closing and put as many as 30,000 people out of work in the region. It is essential that the legislation is blocked in the November referendum.
Totally Gaming says: There can be no doubting that PokerStars’ debut in New Jersey has given the whole market a further boost. The dynamics of the nascent market are interesting and they give a pointer to how future state-by-state openings will fare in their early months and years. The decision of the Third Court of Appeal with regard to sports-betting in New Jersey is likely a temporary blow. A more pressing issue for Atlantic City is the threat posed by the expansion of casino gaming in North New Jersey.